On the back of declining
interest in the traditional central business district (CBD) of Mumbai, some
corporations are establishing their front-office functions in the secondary
business districts (SBDs) and moving back-office activities to the suburban markets.

Leading up to 2020, domestic corporations are expected to move up the value
chain and look to give their staff more attractive working environments. This
will further fuel the relocation from CBD to alternate business districts.

The SBDs have newer and
better-quality buildings and look attractive but there is also a large and
growing scarcity of carparks in SBD Central and SBD North, which is yet to be
resolved.

The government plans to support development of peripheral areas of
Mumbai, with the objective of improving efficiency of labour by locating
businesses closer to suburban residential clusters. This could help ease the
peak hour traffic congestion and over-crowded transit infrastructure.

The city’s office market
is also seeing more mixed-use projects in recent years, with retail components
such as F&B outlets and supermarkets.

Occupiers setting up offices are
particularly drawn to developers with a multi-city presence, and those with
private equity funding, in view of greater scalability, reliability and service
levels.

IT companies demand large land parcels, and are also gravitating
towards suburban locations due to lack of available space in built-up areas.

How Mumbai’s
micro-markets would evolve by 2020..!

·The CBD has
seen its vacancy rise up to 9% in 2016 from 2% in 2007. However, established
Indian corporates and public sector companies are likely to remain major
occupiers here. Tenants will be able to upgrade to better buildings at
competitive rentals on the back of relocations out of the CBD.

However, a few months ago, DBS Bank moved its
office from one building to another within the CBD. Moreover, the government
has conceptualized a rejuvenation plan that will drive the redevelopment of old
buildings as well as new infrastructure projects, which will improve CBD’s
connectivity with rest of the city. The total office stock is ~6 mn sft.

·SBD
BKC is the de-facto CBD and its biggest strengths are its well-planned
development, central location and presence of high-profile occupiers. Continued
government investment in infrastructure, in and around SBD BKC, provides a
strong case for this location moving towards 2020. The total office stock is nearly15 mn sq. ft.

SBD
North is home to Mumbai’s international airport and phase-I of the
Mumbai metro. This office district is attractive due to its cost effectiveness
and east-west as well as north-south connectivity. However, car park scarcity
woes remain an issue, as with SBD Central.

The total stock is about 20 mn sq. ft,
the most office space that any sub-market houses and with many flexible small
office space options.

SBD
Central

The erstwhile ‘mill district’ is witness to defunct mills getting
refurbished or converted into grade-A office developments and plush residential
towers. The rents are 2/3rd of those in CBD and the total stock of office space
is about 13.5 mn sq. ft.

Western
suburbs The sub-market exhibits a perfect blend of residential and retail
developments, hotels, grade-A offices and exhibition centres.

The projects here
offer ample car parking and wide floor plates. Rents in the sub-market are only
a third of those in the CBD. The total stock is about 15.5 mn sq. ft. A clear
uptrend in rents has been observed over recent quarters.

Eastern
suburbs

The sub-market houses build-to-suit buildings, business parks and
an IT SEZ. It was the first to introduce a concept of ‘walk to work’.

The
strategic location, availability of land, upcoming residential developments and
metro rail infrastructure projects are likely to boost the demand for office
space as well as financial indicators. The total stock is about 14.5 mn sq. ft.

Navi
Mumbai is slated to become Mumbai’s IT and FinTech corridor,
and its largest grade-A office market by 2020.

The area is expected to benefit
significantly from the completion of the second airport (estimated to be
operational by 2019) located nearby, as well as the Navi Mumbai metro system
(estimated to be completed by 2020).

However, the district is grappling with problems
arising from rapid urbanization and haphazard developments. The stock here is about17.5 mn sq. ft.

Thane

These
suburban locations have evolved from BPO and industrial markets into
established back-office districts due to clustered talent pools and
availability of grade-A developments.

They have also attracted some
front-office consolidations in recent years. Sustained affordability and
quality infrastructure will ensure these markets’ long-term relevance. The
stock here is about 6 mn sq. ft.

Overall, rental
appreciation is expected around 2020 in the SBDs due to falling vacancy levels,
and in the suburban markets due to a low base effect.

On the other hand, CBD
will see continued decline in rents – barring grade-A properties – due to
scarcity of both large floor plates and modern amenities.

‘Strategy 2020’

For Occupiers..!

Occupiers can plan their future space requirements
and consolidate multiple offices at a single site with good connectivity to
achieve operational efficiencies, reduce costs and address growth.

Offices in
well-located upcoming prime assets in Mumbai are likely to get pre-committed
quickly; hence, awareness is crucial.

Occupiers need to commit early to gain
first-mover advantage in new buildings. They are advised to invest in occupancy
planning and move management to ensure optimal office relocations for their
organization.

For Investors and Developers..!

It will also be crucial for these
stakeholders to anticipate tenants’ needs – with regards to office location,
specifications and quality.

The current grade-A office vacancy rate stands
around 18%, with most of the vacancy being in stock that fails to meet the
requirements of end-users. The vacancy in superior grade-A stock, however, is
9.5% only.

Mumbai’s Key Office Real Estate Trends Leading up to 2020..!
Reviewed by S. Chitra
on
May 02, 2017
Rating: 5 Mumbai’s Key Office Real Estate Trends Leading up to 2020..! by Mr. Karan Singh Sodi, JLL India On the back of declining interes...